U.S. Government Control of Western Telecoms Vendors Would Be Naïve – and Damaging to U.S. Companies

U.S. Attorney General William Barr suggested the U.S. and its allies should consider buying a controlling stake in Nokia or Ericsson to compete more effectively in 5G.

Beyond being hypocritical and practically unworkable, the proposal runs counter to ongoing open RAN initiatives which could help U.S. vendors thrive in 5G by innovating.

Giving the keynote address at the U.S. Department of Justice’s China Initiative conference on February 6, U.S. Attorney General William Barr raised eyebrows by suggesting that the U.S. and its allies should consider buying a controlling stake in Nokia or Ericsson. The argument is that, while both vendors have proven successful in managing customers’ migration from 4G to 5G, they lack Huawei’s scale as well as the backing of a powerful country like China.

The hypocrisy of Barr’s statement in light of frequent – and unproven – accusations that Huawei is controlled in the shadows by the Chinese government is somewhat astonishing. Beyond that issue, however, Barr’s proposal would lead to very practical concerns that make it a non-starter:

Unless the U.S. and allies take equal stakes in both Ericsson and Nokia, there would be a clear differentiation between the ‘government-approved’ and non-government approved vendor. This in turn would greatly weaken the position of the one with a lower equity stake.

‘Controlling stake’ would require significant investment that, in the U.S.’s case, would presumably need to be approved by Congress, which holds the ‘power of the purse.’ Given Congress’ recent inability to get very much accomplished, this seems highly unlikely.

A nation purchasing a controlling stake in a private company is considered by many a form of socialism, and it juxtaposes awkwardly against many of the themes embraced by the Trump re-election campaign.

Barr’s speech is also concerning because, after accurately pointing out that the U.S. does not have any RAN providers with much scale, he went on to downplay current efforts by open RAN proponents to build a potentially disruptive new approach to radio architecture that could dramatically reduce buildout and operational costs for operators (and, by the way, lower costs for 5G service to customers).

Barr’s declaration that open RAN is “completely untested, and would take many years to get off the ground, and would not be ready for prime time for a decade, if ever” no doubt came as a surprise to a host of innovative American telco vendors that are currently in lab trials with open RAN – among them, Mavenir, Altiostar, and Parallel Wireless. Oh yes, and a little U.S. company named Cisco Systems is also an ardent open RAN supporter.

Barr’s shunning of open RAN also runs counter to a (rare) bipartisan proposal announced in January that – rather than discourage U.S. innovation – would actually bring $1 billion to support open RAN innovation by a handful of promising U.S. vendors. Unlike Barr’s misguided proposal, which is likely to go nowhere, new funding for open RAN could actually foster the kind of innovation that U.S. vendors could use to establish a stronger presence in mobile networks.